Shares of Hindustan Zinc witnessed a dramatic rally on Friday, January 23, soaring more than 6% to achieve a historic peak of ₹709.95. This impressive surge is directly linked to silver prices scaling unprecedented heights, fueled by escalating geopolitical risks and mounting apprehensions regarding US economic and policy stability. As one of India's premier silver producers, Hindustan Zinc stands as a primary beneficiary of the ongoing precious metals boom.
Silver Prices Reach New Milestones
Silver futures on the Multi Commodity Exchange (MCX) leaped nearly 4% on Friday, setting a fresh all-time high of ₹3,39,927 per kilogram. This sharp upward movement was bolstered by a combination of factors including a weaker US dollar, heightened geopolitical tensions, and renewed concerns about the independence of the US Federal Reserve. Collectively, these elements have amplified safe-haven demand for precious metals.
In international markets, silver advanced 2.5% to $98.60 per ounce, edging closer to the psychologically significant $100 threshold. The global rally underscores silver's growing appeal as a defensive asset in turbulent times.
Global Factors Fueling the Surge
Market sentiment is being shaped by a complex mix of geopolitical and macroeconomic developments. Recent diplomatic maneuvers, including a US agreement involving Greenland that entails missile deployment, mining rights, and enhanced NATO security, have contributed to global unease. Simultaneously, investors are keenly monitoring US monetary policy, awaiting President Donald Trump's announcement on the next Federal Reserve chair.
Expectations of a more dovish Fed leadership have strengthened bets on additional interest-rate cuts later this year, following three consecutive reductions. Lower interest rates typically provide support for non-yielding assets like gold and silver, adding further momentum to the precious metals rally.
Hindustan Zinc's Stellar Performance
Hindustan Zinc's stock performance vividly reflects the strength of the silver-led rally. The share price has skyrocketed over 87% from its 52-week low of ₹378.65, recorded in March 2025. Across various timeframes, the Vedanta-owned stock has delivered robust gains: 48% over the past year, 57% in the last six months, 45% in the last three months, and 25% in the past month. Over the long term, Hindustan Zinc has transformed into a multibagger, generating returns of approximately 155% over the past five years.
Robust Q3FY26 Financial Results
Hindustan Zinc reported exceptionally strong earnings for the third quarter of FY26, surpassing market expectations across profit, revenue, and operating metrics. This outstanding performance was driven by record production levels, firm commodity prices, and a significant reduction in costs.
The company posted a standalone net profit of ₹3,879 crore, marking a substantial 46.5% year-on-year increase from ₹2,647 crore. Revenue from operations rose 27.5% YoY to ₹10,922 crore, compared with ₹8,556 crore in the year-ago quarter.
Operational Excellence
Operating performance was equally impressive. EBITDA jumped 34.7% YoY to ₹6,055 crore, comfortably exceeding estimates of ₹5,614 crore. EBITDA margin expanded to 55%, up from 52% a year earlier, supported by lower zinc production costs and improved operating leverage.
The company highlighted that Q3FY26 represented its highest-ever quarterly revenue and profit, aided by higher metal output, stronger zinc and silver prices, and a sharp decline in costs. Zinc cost of production (excluding royalty) dropped to a five-year low of USD 940 per tonne, down 10% year-on-year, driven by reduced power costs and higher by-product realizations.
EBITDA margins expanded by 310 basis points to 55.1%, while profit after tax rose 46% YoY. Silver accounted for nearly 44% of total EBIT during the quarter, underscoring its growing importance to the company's earnings.
Operationally, Hindustan Zinc achieved record third-quarter mined metal production of 276 kilo tonnes and refined metal production of 270 kilo tonnes. Silver output increased 10% sequentially, contributing 44% of profits during the quarter.
Analyst Outlook and Investment Perspective
IIFL Capital maintains an 'ADD' recommendation on Hindustan Zinc with a target price of ₹712, suggesting an upside of about 5% from current levels. The brokerage values the company at 10x EV/EBITDA, noting that every USD 10 per ounce change in silver prices impacts HZL's fair value by approximately ₹59 per share.
The brokerage emphasized HZL's strong Q3FY26 performance, with EBITDA rising 36% quarter-on-quarter and 35% year-on-year, coming in 8% above consensus estimates. This outperformance was driven by sharply lower costs, with zinc cost of production (excluding royalty) falling to $940 per tonne, the lowest level in five years.
While growth projects remain on track, IIFL Capital expects volume growth to stay muted in the near term, at around 2.5% CAGR over FY26–FY28. The brokerage identifies silver prices as the key earnings driver, estimating EBITDA growth of approximately 15% CAGR over the same period.
"We expect silver to stabilize at structurally higher levels, around $60 per ounce, even though near-term moves remain highly volatile," IIFL Capital stated.
Strong cash flows are anticipated to support elevated dividend payouts of around 3%. Key risks include a sharp decline in silver prices, a global economic slowdown, and further stake sales by Vedanta or the government.
Disclaimer: The views and recommendations mentioned above are those of individual analysts or broking companies, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
